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QUESTION 5 Calculate the price of this bond: Yield = 5.55%, Time to maturity = 7...

QUESTION 5

Calculate the price of this bond: Yield = 5.55%, Time to maturity = 7 years, Coupon rate = 4.6%, Pays = annually.

948.85

990.87

690.83

946.11

None of the above
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Homework Answers

Answer #1
Coupon Interest rate = 4.60%
Par value of bond = $1,000.00
Interest per coupon (1000*4.6%) = $46.00
YTM rate 5.55%
No. of years to Maturity 7
Calculation of price of bond @ 5.55% YTM
Annual Interest received =    46.00
Cumulative P.V.F. @ 5.55 % for 7 Years =
(1- ((1/(1.0555)^7)))/0.0555 5.672783
Present value of interest received $260.95
Maturity amount received = 1000
P.V.F. @ 5.55 % for 7 th year = 0.685161
(1/(1+0.0555)^7)
Present value of Maturity amount $685.16
Price of bond $946.11
So, price of bond is $946.11.
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